Texas Court Blocks Department of Labor’s Overtime Rule
On November 15, 2024, a federal judge in Texas struck down the U.S. Department of Labor’s (DOL) rule that raised salary thresholds for overtime exemptions under the Fair Labor Standards Act (FLSA). This decision has far-reaching implications for employers and workers nationwide, particularly those affected by the 2024 changes.
Overview of the DOL’s Rule and Decision
The DOL’s rule, effective July 1, 2024, increased the minimum weekly salary for exempt employees under the FLSA’s executive, administrative, and professional (EAP) exemptions from $684 ($35,568 annually) to $844 ($43,888 annually). It also scheduled an increase to $1,128 per week ($58,656 annually) on January 1, 2025, with automatic triennial adjustments thereafter.
U.S. District Judge Sean D. Jordan vacated the rule, finding that the DOL exceeded its statutory authority. His ruling emphasized that exempt status under the FLSA should prioritize job duties rather than salary levels, aligning with recent decisions by the Fifth Circuit and the Supreme Court, which limited judicial deference to agency interpretations.
Key Points from the Ruling
Judge Jordan determined that the DOL’s emphasis on salary thresholds improperly displaced the statutory focus on job duties. He noted that under the 2024 rule, approximately one-third of workers meeting the duties test would lose exempt status solely due to salary. The court also invalidated the rule’s automatic triennial salary adjustments, citing a lack of compliance with the Administrative Procedure Act’s notice-and-comment requirements. Additionally, the decision immediately reinstates the 2019 salary thresholds ($684 per week ($35,568 annually) for employee assistance program employees and $107,432 annually for highly compensated employees).
Implications for Employers
The decision also has immediate implications for employers. Employers can revert to the 2019 salary thresholds. However, those who increased salaries to comply with the 2024 rule should carefully consider the employee relations impact of rolling back compensation. The ruling does not affect state-specific overtime laws. Employers in states with higher thresholds (e.g., California, New York, Colorado) must continue to adhere to those requirements.
It is possible that the DOL will appeal the ruling, but an administrative change in January 2025 could further shape the outcome. Employers should remain vigilant and prepared for potential regulatory shifts.
What’s Next?
Employers should comply with the reinstated 2019 thresholds and monitor developments closely. The ruling highlights the ongoing tension between federal overtime regulations and business concerns over compliance costs. For tailored guidance on compliance and workforce management, contact Walker R. Lawrence, chair of Levin Ginsburg’s labor and employment practice.
